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Editorial comment

A report by the US Energy Information Administration (EIA) published in June 2013, estimates that ‘technically recoverable’ global shale resources currently stand at 345 billion bbls. of shale oil and 7299 trillion ft3 of shale gas. These accumulated reserves are located in 41 countries around the world and represent 10% of global oil resources and 32% of global gas resources. The reported figure for shale gas alone is 10% higher than the estimate from the previous report published in 2011 and goes some way to illustrate the rise and rise of shale resources over recent years. Russia (75 billion bbls.), US (58 billion), China (32 billion) and Argentina (27 billion) represent the four largest shale oil reserves whilst the top four shale gas reserves are located in China (1115 trillion ft3), Argentina (802 trillion), Algeria (707 trillion) and US (665 trillion).

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However, the key phrase in the context of this report is ‘technically recoverable’ for there is still significant debate as to whether the rest of the world will be capable of harnessing its resources to quite the same extent as has been possible in the US. To date little progress has been made outside North America with obstacles including public objection, currently being experienced by Cuadrilla Resources in the UK, complicated land rights, a lack of drilling infrastructure and availability of water and a dearth of domestic pipeline networks, hampering large-scale development.

Nonetheless, the shale boom remains a ‘game changer’ chiefly because it has altered the global oil dynamic. With the US set to become the world’s largest oil producer by 2017, leading producers and trans-Atlantic exporters such as Nigeria, Algeria and Saudi Arabia have already witnessed a discernable drop in exports which promises to become a greater chasm as the shale revolution gathers pace. Typically, leading oil producing nations have been slow to react to the impact of increased shale production on their own heavily oil and gas dependent economies. But, in a rare public display of discord, Prince Alwaleed bin Talal, the billionaire Saudi Arabian businessman, has this month posted a letter on Twitter addressed to Ali Naimi, the Saudi oil minister, and copied to King Abdulla of Saudi Arabia, in which he challenges Ali Naimi’s declared lack of concern over the significance of rising shale oil production. He writes that, ‘the world is increasingly less dependent on oil from OPEC countries including the Kingdom’ and ‘sees that rising North American shale gas production is an inevitable threat’ because of the kingdom’s ‘near complete reliance on oil, especially as 92% of the budget for this year depends on oil’. Whilst these sentiments are specific to Saudi Arabia they ring true across a host of other oil producing nations not least of which, Russia whose ailing economy is inextricably linked to current and future oil and gas revenues.

Good news for many producers however, and a boost for the industry in general ahead of the forthcoming Offshore Europe Conference & Exhibition in Scotland in September, is the apparent uptick in European oil demand. Whilst analysts are urging caution, the International Energy Agency (IEA) has adjusted its estimate upwards for the second quarter of 2013 to reflect the first growth in European oil demand since 2010. Let’s hope this is no blip. In the meantime, we look forward to seeing you in Aberdeen.

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